Indo Rama Synthetics (India) ... vs Union Of India And Ors.
2001 Latest Caselaw 1988 Del

JUDGMENT

S.B. Sinha, C.J.

1. Whether a mistake committed by importer in payment of higher duty owing to a computer mistake, can be subject matter of an order of refund thereof, is the question involved in this petition.

2. The basic fact of the matter is not in dispute. The petitioner herein is a public limited company engaged in the business of manufacturing synthetic yarn and fibre. It had been importing machinery and spare parts for using in their manufacturing plants from time to time. A Bill of Entry No. 905803 was issued for import of spare parts namely Module and Circuit Board along with the copy of the Invoice on 7th July 1995, the value whereof was declared as DM 709.83 of the Module and DM 291.81 for the Circuit Board.

3. An error, however, was committed in payment of the Excise Duty by ignoring the declared value for the purpose of assessment under the Excise Act which was taken to be DM 70982 and DM 29181 instead in place of DM 709.82 and DM 291.81 as a result whereof, 100 times more customs duty had been paid. A sum of Rs. 15,96,030/- instead of Rs. 15,960.30 by way of import duty was deposited on 15th July 1995 on the basis of the wrong calculation of the respondents through challan No. 5651 which is in TR 6 form. After a long time, the mistake was detected whereafter, an application purported to be under Section 154 of the Customs Act seeking rectification of the said clerical error, was filed on 23rd September 1996, which reads thus:

Sub:- request for rectification and correction of mistakes and passing consequential order Under Section 154 of the Customs Act, 1962.

We invite your kind attention to the Bill of Entry No. 905803 dated 7th July 1995 filed before you, which was duly assessed by you. In terms of Bill of Entry and the Invoice accompanying the same, the imported goods namely, Module, came to us, which had a price of DM 709.82, free of charge from the foreign supplier in replacement of the one, which was received by us earlier defectively. Similarly, in the same Bill of Entry and Invoice, the Circuit Board obtained by us has been shown to have a price of DM 291.81, supplied free of charge by the foreign party. In respect of both the items, while making assessment of the Bill of Entry and determining the duty of Customs payable thereon, your office, inadvertently and by oversight, had taken the figures at DM 70902 and DM 29181 respectively. In other words, the decimal in both the figures had been lost sight of as a result, the duty demanded and collected from us is correspondingly higher whereas, it should have been the lower amount as per the actual invoice amount. Thus, the duty liability has been demanded 100 times more from us and this is a mistake apparent from record and need immediately to be rectified by you.

We are, therefore, requesting you by this application Under Section 154 of the Customs Act to do the needful to rectify the mistakes immediately and to pass consequential orders and communicate the same to us at the earliest."

4. A request had also been made for issuance of the assessment order on 12th February 1997. Yet again, such requests had been made on 13th March 1997 and 26th March 1997, but the respondents failed to respond thereto. On several dates, the petitioner went on making requests to the respondents for rectification of the clerical mistake and refund the excess amount collected, but the same requests had not been acceded to. The writ petition had been filed by the petitioner herein claiming, inter alia, the following reliefs:

(a) to issue an appropriate Order or direction more particularly a one in the form of a writ or Mandamus thereby directing the Respondents to refund the amount of Rs. 15,80,069.70 which has been wrongly withheld by the Respondent No. 2 since 7.7.1995;

(b) to also grant interest @ 18% per annum w.e.f. 7.7.1995, on the withheld amount;

(c) to grant costs of the present Civil Writ Petition in favor of the Petitioner; and

(d) to pass such other and further order(s) as this Hon'ble Court may deem fit and proper in the interest of justice.

5. In the counter-affidavit filed on behalf of the respondents which has been affirmed by the Assistant Commissioner of Customs, Mr. Ravinder Saroop, an objection has been taken into effect that the petition is hopelessly barred by limitation having regard to the provisions of Section 27 of the Act and furthermore, in the facts and circumstances of this case, Section 154 thereof had no application.

6. The contention raised on behalf of the writ petitioner to the effect that the mistake was committed in the office of the respondents, has also been denied and disputed. Ms. Anusuya Salwan, the learned counsel appearing on behalf of the petitioner, would submit that Section 154 of the Customs Act not only embraces in its fold a mistake crept in the order or the decision passed by the authorities under the Customs Act but also other errors and mistakes. The learned counsel would submit that the said amount had not been paid by way of excise duty or purported customs duty but was in effect and substance, paid by way of only a mistake and thus, the bar of limitation provided under Section 27 of the said Act will have no application whatsoever in the instant case. In support of the said contention, the learned counsel placed strong reliance upon the decisions of Hindustan Fertilizer Corporation v. Collector of Customs, 1993 (63) ELT 648 (Tribunal) and Collector of Customs, Chandigarh v. Oswal Woollen Mills Ltd., 1995 (76) ELT 408 (Tribunal).

7. Ms. Rekha Palli, appearing on behalf of the respondents, on the other hand, would submit that the petition is barred by limitation and in support of the said contention, reliance has been placed on MMTC v. Collector of Customs, Bombay, 1987 (28) ELT 128.

8. The learned counsel would further submit that a gross negligence has been committed by the writ petitioner herein. The computer error cannot be taken in aid for the purpose of maintaining this wit petition. Strong reliance has been placed on W.B. State Electricity Board v. Patel Engineering Co. Ltd. & Ors., (2001) 2 SCC 451 and Section 154 of the Customs Act. Section 154 of the Customs Act reads thus:

"SECTION 154. Correction of clerical errors, etc. -

Clerical or arithmetical mistakes in any decision or order passed by the Central Government, the Board or any officer of customs under this Act, or errors arising therein from any accidental slip or omission may, at any time, be corrected by the Central Government, the Board or such officer of customs or the successor in office of such officer, as the case may be."

9. A bare perusal of the afore-mentioned provision, in our opinion, would clearly show that the same does not cover an error committed by the importer and would not come within the purview thereof. It may be true that if a case comes within the purview of Section 27 of the Customs Act, the petitioner was bound to file an application for refund of the Customs Act within a period of six months but the question which arises for consideration in this case, would be as to whether the respondents, being a State, can unduly and unjustly enrich itself at the cost of the importer?

10. Having regard to the principles adumbrated under Article 14 of the Constitution of India, there cannot be any doubt whatsoever that in all its actions, the State must act reasonably, fairly and equitably. It is trite that the State must act as benevolent litigant, and should not take the plea of limitation or other technical pleas for the purpose of defeating the just and bona fide claim of the importer.

11. It is further well settled that in a case of this nature, the appropriate statutory authority must apply its mind for the purpose of finding out as to whether the contentions raised by the petitioner that a bona fide error has crept in while making calculation, is correct or not.

12. It is true that the petitioner herein is guilty of gross negligence, but the same. in our opinion, would not mean that the statute should be construed in such a manner that even a bona fide mistake committed by the petitioner, may be allowed to go unnoticed. If, in relation to an administrative action, the statutory or administrative authority is entitled to correct a bona fide mistake, we do not see any reason as to why the State shall take recourse to unjust enrichment only because such a mistake had been committed by the petitioner herein. A mistake, it is trite, can be rectified even by a statutory or executive authority. By reason of such rectification of such mistake, as civil consequences would ensue, the principles of natural justice may have to be complied with but where the facts are admitted, even the said principles need not be complied with (see Bhagwan Shukla v. Union of India & Ors., and Dr. Wren International Ltd. & Anr. v. Engineers India Ltd. & Ors., ).

13. A fair, reasonable and equitable stand in a lis by the State is the basic pillar of good governance.

14. It is not a case, where a tenderer, who was bound to meticulously fill up a tender form having regard to a warning, would not be permitted to rectify a mistake. In W.B. State Electricity Board v. Patel Engineering Co. Ltd. & Ors. (supra) where public works of international competitive bidding was involved, the parties were able to fulfill pre- qualification criteria only would have been entitled to participate. The apex court, in the afore-mentioned situation, held that strict adherence to instructions to bidders is essential and cannot be branded a pedantic approach. In the instant case, there is no such instruction. If the petitioner herein was negligent, so were the officers of the respondents. There cannot be any doubt whatsover that the officers of the respondent were equally responsible in the sense that they also had a duty to see that the correct customs duty is paid having regard to the value of the imported goods. It is not in dispute that the challan had to be filled up which is in the prescribed form. If there was a mistake in the challan, it is expected that the concerned authorities world have also noticed the mistake and refused to accept the challan. In a situation of this nature, we are of the opinion that a genuine mistake committed on account of faulty functioning the computer could be permitted to be corrected.

15. The case of W.B. State Electricity Board v. Patel Engineering Co. Ltd. & Ors. (supra) was decided on the technicalities of the case obtaining therein, as would appear from the following:

24. "... It cannot be disputed that this is an international competitive bidding, which postulates keen competition and high efficiency. The bidders have or should have assistance of technical experts. The degree of care required in such a bidding is greater than in ordinary local bids for small works. It is essential to maintain the sanctity and integrity of process of tender/bid and also award of a contract. The appellant, Respondent 1 to 4 and Respondents 10 and 11 are all bound by the ITB which should be complied with scrupulously. In a work of this nature and magnitude where bidders who fulfill prequalification alone are invited to bid, adherence to the instructions cannot be given a go-by by branding it as a pedantic approach, otherwise it will encourage and provide scope for discrimination, arbitrariness and favoritism which are totally opposed to the rule of law and our constitutional values. The very purpose of issuing rules/instructions is to ensure their enforcement lest the rule of law should be a casualty. Relaxation or waiver of a rule or condition, unless so provide under the ITB, by the State or its agencies (the appellant) in favor of one bidder would create justifiable doubts in the minds of other bidders, would impiar the rule of transparency and fairness and provide room for mainpulation to suit the shims of the State agencies in picking and choosing a bidder for awarding contracts as in the case of distributing bounty or charity. In our view such approach should always be avoided. Where power to relax or waive a rule or a condition exists under the rules, it has to be done strictly in compliance with the rules. We have; therefore, no hesitation in concluding that adherence to the ITB or rules is the best principle to be followed, which is also in the best public interest.

The Court however noticed Para 84 of the American Jurisprudence (2nd Edn., Vol. 64, p 944), which is in the following terms:-

26. "... As a general rule, equitable relief will be granted to a bidder for a public contract where he has made a material mistake of fact in the bid which he submitted, and where, upon the discovery of any mistake, he acts promptly in informing the public authorities and requesting withdrawal of his bid or opportunity to rectify his mistake particularly when he does so before any formal contract is entered into."

16. The apex court also noticed a decision of the Supreme Court of USA in Moffett, H. and C. Co. v. Rochester (178 US 373) and the superior court of New Jersey in Spina Asphalt Paving Excavating Contractors. Inc. v. Borough of Fairview, 4 304 NJ Super dealing with the case of contract. We are also not dealing with the case where the bidders were required to scrupulously follow the instructions before filling up the tendered documents. Here, we are concerned with a mistake committed by an importer which has to be judged on teh touchstone of the fairness in action at the hands of the State. We, therefore, are of the opinion that although Section 154 of the Customs Act cannot be said to have any application, it is a fit case where the respondents should consider the matter on merit ignoring the provisions contained in Section 27 thereof on the ground that having regard to the provisions of Article 265 of the Constitution of India as also the provisions of general principles of law and equity, the State should not unjustly enrich itself. This court is not only a court of law but also the court of equity. In Halsubry's Laws of England, Fourth Edition Vol. 32 p. 1, it is stated:

3. Mistake as a ground for relief. At common law mistake was admitted as a foundation of relief in three cases only, namely (i) in actions for money had and received to recover money paid under a mistake of fact; (2) in action of deceit to recover damages in respect of a mistake induced by fraudulent misrepresentation; and (3) as a defense in actions of contract where the mistake of fact was of such a nature as to preclude the formation of any contract in law, for example, where there was a mutual mistake as to teh subject matter of the contract, and, therefore, no consensus ad idem by the parties, or where the mistake was made as to the identity of one of the parties and such identity was an inducement to the other to enter into the contract, or where the mistake related to the nature of the contract under such circumstances as would, if the contract were embodied in a deed, justify a plea of non est factum.

In equity mistake gives title to relief in a much wider range of cases than at common law, although it must be borne in mind that "mistake", as a legal term on which a right to relief may be founded, has a much narrower meaning that it has in popular use.

The court has power to grant relief to a plaintiff whose election between two alternative claims is due to a mistake in the manner of making use of the machinery of the court. ( S. Kaprow & Co. Ltd. v. Macelland & Co. Ltd. [1948] 1 KB 618, [1948] 1 All ER 264, CA; Firth v. John Mowlem & Co. Ltd.

[1978] 3 All ER 331, [1978] 1 WLR 11 84, CA (appearance entered by mistake).

The distinction between mistake at common law and in equity is also important because of its effect on the rights of third parties. At law mistake renders a contract void ab initio; third parties cannot acquire title to property dealt with under it.

However, in equity the contract is merely voidable and third party rights may be acquired.

If the relationship between the parties to a transaction imposes a duty on one party to inform the other of all the material facts and the party owing such a duty fails to do so, the transaction may be set aside on the ground of mistake.

Mistake may also be made a ground for relief by statute."

17. Having regard to the views we have taken, we are of the opinion that the decisions cited at the bar are not of much relevance. For the reasons afore-mentioned, this writ petition is allowed and the respondents are hereby directed to consider the matter on merit and pass an appropriate order after giving an opportunity of hearing to the petitioner: Such an order should be passed at an early date and preferably within a period of three weeks from the date of communication of this order.

18. Let a writ of mandamus be issued accordingly. This writ petition is disposed of. However, in the facts and circumstances of the case, there shall be no order as to costs.